QT begins: €15 billion a month of APP reinvestment ceases

ECB night

Goodbye to primary market frontloading. The window for issuance before the start of the QT has closed. And therefore the pressure in some segments, such as covered bonds (+43% YTD, €70mm), is expected to ease. And although the ECB has made it clear that it will continue to participate in the primary green issuance after the start of QT, the utilities sector is the other sector that has advanced its needs the most with €27 billion issued, in the best start of the year, far exceeding the previous record of 2021 YTD of €17 billion.

All in all, the first phase of the ECB’s March-June passive QT programme that effectively started yesterday (T+2, €15mm/month of APP maturities that will not be reinvested) should not make a material change in a liquidity environment still rich and with primary demand even rising to 2.6x b/c last week (2x the previous week) in a difficult week for markets.

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The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.